The U.S. federal government shutdown that started on October 1 was already taking a toll. Today, it has cost its 36th day, making it the nation’s longest shutdown ever. As we predicted, Democratic and Republican senators are in a deadlock over key appropriations priorities. This standoff involves extensions of tax credits that have a huge impact on health care costs under the Affordable Care Act (ACA). With negotiations still seemingly at an impasse, the economic fallout from this work stoppage is starting to emerge.
The shutdown began when Democratic senators demanded the inclusion of an extension for Joe Biden-era tax credits in any government funding bill. These tax credits are important for keeping costs down for marketplace health plans acquired through ACA exchanges. Republican senators have pushed back on all of these demands. Consequently, the extended stalemate has furloughed nearly 700,000 federal employees and compelled hundreds of thousands more to work without compensation.
Approximately 700,000 federal employees will be expected to work—and in many cases, indefinitely—without pay. They would be paid only after new funding is appropriated. Earlier this month, former President Donald Trump stirred up quite a bit of controversy with an announcement. He has proposed using unspent Pentagon R&D funds to ensure that U.S. servicemembers continue to get their usual paychecks. Legal scholars—including former Department of Justice officials—have warned that Trump’s move is illegal, warning that it likely violates multiple federal laws.
This continued shutdown has broken the previous record of 35 days. That record only happened thanks to December 2018 and January 2019 when appropriations efforts completely stopped because Trump demanded financing for a wall along the southern border. As it stands now, Congress remains at an impasse. Republican and Democratic senators are locked in a hotly contested fight over the terms necessary to reopen funding for shuttered federal agency departments.
The severe economic ramifications of the shutdown are only just starting to come to light. Even the nonpartisan Congressional Budget Office is cautioning that the shutdown would deal a major blow to our still-fragile economy. Long-lasting, it can be as expensive as $14 billion in lost GDP. With federal assistance still frozen, the effect on public health, transportation, aging services, is expected to increase.
In a reversal to this trend, just last week the Republican-controlled U.S. House of Representatives passed a funding bill that included support from a single Democrat. In the time since, Speaker Mike Johnson has largely prevented the chamber from coming to the floor, further muddying the waters on how a resolution would be reached. Democrats are right to continue holding the GOP accountable for addressing the pending increase in premiums on ACA marketplace plans. If the tax credits expire altogether, those premiums would go up by at least 26% on average.
With each party doubling down on their mutually exclusive demands, there appears to be no resolution coming anytime soon. The stakes are high, not just for federal employees and military personnel but for millions of Americans who rely on affordable health care coverage.